I don't think this is the best place for this question, but i'll answer anyway:

YES, it is all free, it is all legal (dependant on local copyright laws) and if it wasn't then you can bet that it would have been taken off the internet by now.

It is true that it's hard to imagine so much great music for free, but there are many people out there who want to share thier own personal collections of music with the world, and the internet makes that possible if someone is willing to put in the time and effort to make a place to share the music with everyone and anyone.

There are numerous other sites with free music avalible, but this one is the biggest (and best) one around because it is a wiki, very few (any?) other similar projects allow everyone to contribute so only have a small group working on them instead of potentially hundreds here.